5 Years Ago: Fidelity Goes Government
Five years ago, we wrote "Fidelity Announces Major Changes to MMFs; Staying Stable, Going Govt," which marked the start of what we termed "The Big Sort," a massive shift of Prime money market funds into Government money funds ahead of 2016's Money Fund Reforms. The massive transitions of Prime and Tax Exempt MMFs into Government MMFs eventually totaled $1.2 trillion. Our Feb. 2, 2015 article said, "The first major strategic shift following the Security and Exchange Commission's money market fund reform occurred Friday as the world's largest manager of money funds, Fidelity, announced major changes to its money market fund lineup. The shifts are to comply with pending reforms and to meet investor needs, with the most noteworthy being a move to convert some of its prime funds into government funds, including the largest money market fund in the world, the $114 billion Fidelity Cash Reserves. (See Fidelity Cash Reserves' Prospectus Supplement filing here.) Nancy Prior, President of Fidelity's Fixed Income Division, tells Crane Data, "We're fully committed to the money market fund business.... We're going to have a robust product lineup covering all of the categories, including retail and institutional prime and municipal funds, along with government and Treasury funds, because we want to make sure we can meet all of our customers' investment needs. But we're making these changes now in response to the preferences that we've heard back from several segments of our customer base that would like to continue to have a money market fund with a stable NAV and without gates and fees." (See also Fidelity's "Update on money market fund regulations" and "Fidelity Money Market Mutual Fund Changes.") Prior announced the 4 key changes as part of "Phase 1" of its changes to its money fund lineup. The first is to amend the investment policies their government and U.S. Treasury money market mutual funds to reflect that these funds already meet the new SEC requirement to invest at least 99.5% of their assets in cash, government securities, and/or repurchase agreements that are fully collateralized. Second, Fidelity plans to convert several of its prime money market mutual funds to government money market mutual funds. Specifically, the Fidelity Cash Reserves Fund will be converted into the Fidelity Government Cash Reserves Fund; the FMMT Retirement Money Market Portfolio will be converted to the FMMT Retirement Government Money Market Portfolio II, and the VIP Money Market Portfolio will be converted to the VIP Government Money Market Portfolio. All are subject to shareholder approvals via a March proxy vote. Third, the company is proposing to merge several funds that have similar investment strategies. The Fidelity Treasury Money Market Fund (U.S. Treasury) will be merged into the CMF Treasury Fund to form the Fidelity Treasury Money Market Fund (U.S. Treasury). The CMF Government Fund (Government) will be merged into the Fidelity Government Money Market Fund to form the Fidelity Government Money Market Fund (Government). The AMT Tax-Free Money Fund (Municipal) will be merged into the CMF Tax-Exempt Fund to form the Fidelity Tax-Exempt Money Market Fund (Municipal). No shareholder action is required and these changes will take place in the first quarter."
